BMW to invest $1 billion in new plant in Mexico

MEXICO CITY — BMW A.G. plans to spend $1 billion to build a plant in San Luis Potosi, Mexico, with capacity of about 150,000 units per year, the company said July 3.

Start of production is planned for 2019, with a work force of about 1,500 employees, according to Harald Krueger, BMW board member for production, in a statement. BMW did not disclose what models it will build at the plant.

Mr. Krueger said the new plant, combined with BMW’s plant in Spartanburg, S.C., underscores the vehicle maker’s commitment to the North American Free Trade Agreement (NAFTA) region—Mexico, Canada and the United States.

“The Americas are among the most important growth markets for the BMW Group,” he said. “We are continuing our strategy of ‘production follows the market.’”

BMW’s announcement comes on the heels of a recent announcement that, in a joint venture, Renault-Nissan and Daimler A.G. will construct a $1.36 billion plant in Aguascalientes, Mexico, to build compact vehicles for their Infiniti and Mercedes-Benz brands.

BMW made its announcement in Mexico City at the residence of Mexico’s president, Enrique Peña Nieto. He attended the ceremony along with Secretary of Economy Ildefonso Guajardo Villarreal and the governor of San Luis Potosi state, Fernando Toranzo Fernández.

BMW said Mexico’s “large number of international free trade agreements—within the NAFTA area, with the European Union and the MERCOSUR [South American trade bloc] member states, for example—was a decisive factor in the choice of location.”

The auto maker also cited the quality of the work force, a supplier network that BMW already sources parts from, and infrastructure. Mr. Krueger said BMW has “already reached initial agreement with worker representatives in San Luis Potosi.”

BMW already has more than 100 suppliers in Mexico, Mr. Krueger said, and that number has doubled over the last four years. There will be more supplier opportunities in the future, he said.

Andreas Klugescheid, corporate and government affairs head of communications for BMW’s production network, told Automotive News, a sister publication of Tire Business, that supply sourcing in Mexico in 2013 totaled $1.61 billion dollars.

Site competition

Mr. Fernández, governor of the state of San Luis Potosi, said the government there was in talks with BMW over the plant for five years.

Mr. Krueger said BMW considered more than 10 sites in Mexico. Finalists were the states of San Luis Potosi and Hidalgo.

At the ceremony Mr. Nieto said that “Mexico is sending a clear message to the world that it’s in a state of transformation.”

That was in reference to a number of fiscal, political and telecommunications reforms that his government has launched since he took office 18 months ago. He said his government has attracted $13 billion dollars worth of investment in the automotive sector.

BMW sales in Mexico

BMW Group sold 13,992 vehicles in Mexico in 2013, an increase of 18 percent year-over-year. Motorcycle sales last year were 2,064 units, up 17 percent.

In March, the BMW Group announced a further investment of $1 billion at the Spartanburg plant to boost capacity to up to 450,000 vehicles by the end of 2016. The expansion will make Spartanburg the largest plant in the BMW Group’s international production network.

The company also is spending $200 million to expand its joint venture plant in Moses Lake, Wash., to manufacture carbon-fiber reinforced plastic.

Also, BMW is building an assembly plant in Santa Catarina state in Brazil. The start of production for the Brazilian factory is scheduled for later this year.

Freelance writer Stephen Downer contributed to this report, which appeared in Automotive News, a Detroit-based sister publication of Tire Business.